Glossary of terms

Term Definition

Administered item Administered item generally refers to a department lacking the capacity to benefit from that item in the pursuit of the department’s objectives and to deny or regulate the access of others to that benefit.

Annualised employee

equivalent Annualised employee equivalent is based on paid working hours of 38 ordinary hours per week over 52 weeks for a reporting period.

Capital asset charge A charge levied on the written-down value of controlled non-current physical assets in the commission’s balance sheet which aims to: attribute to the opportunity cost of capital used in service delivery; and provide incentives to the commission to identify and dispose of underutilised or surplus assets in a timely manner.

Commitments Commitments include those operating, capital and other outsourcing commitments arising from non-cancellable contractual or statutory sources.

Comprehensive result The net result of all items of income and expense recognised for the period.

It is the aggregate of operating result and other comprehensive income.

Controlled item Controlled item generally refers to the capacity of a department to benefit from that item in the pursuit of the department’s objectives and to deny or regulate the access of others to that benefit.

Depreciation Depreciation is an expense that arises from the consumption through wear or time of a produced physical or intangible asset. This expense is classified as a transaction and so reduces the net result from transactions.

Employee benefits

expenses Employee benefits expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, redundancy payments and superannuation contributions.

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Term Definition

Financial asset A financial asset is any asset that is:

a) cash;

b) an equity instrument of another entity;

c) a contractual right:

• to receive cash or another financial asset from another entity; or

• to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or

d) a contract that will or may be settled in the entity’s own equity instruments and is:

• a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or

• a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.

Financial instrument A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets or liabilities that are not contractual (such as statutory receivables or payables that arise as a result of statutory requirements imposed by governments) are not financial instruments.

Financial liability A financial liability is any liability that is:

a) a contractual obligation:

• to deliver cash or another financial asset to another entity; or

• to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or

b) a contract that will or may be settled in the entity’s own equity instruments and is:

• a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or

• a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments.

96 Financial statements

Term Definition

Financial statements A complete set of financial statements comprises:

a) a comprehensive operating statement for the period;

b) a balance sheet as at the end of the period;

c) a statement of changes in equity for the period;

d) a cash flow statement for the period;

e) notes, comprising a summary of significant accounting policies and other explanatory information;

f) comparative information in respect of the preceding period as specified in paragraph 38 of AASB 101 Presentation of Financial Statements; and g) a balance sheet as at the beginning of the preceding period when an entity

applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with paragraph 41 of AASB 101.

Grants Transactions in which one unit provides goods, services, assets (or

extinguishes a liability) or labour to another unit without receiving approximately equal value in return. Grants can either be operating or capital in nature. While grants to governments may result in the provision of some goods or services to the transferor, they do not give the transferor a claim to receive directly benefits of approximately equal value. Receipt and sacrifice of approximately equal value may occur, but only by coincidence. For example, governments are not obliged to provide commensurate benefits, in the form of goods or services, to particular taxpayers in return for their taxes. For this reason, grants are referred to by the AASB as involuntary transfers and are termed non- reciprocal transfers.

Grants can be paid as general purpose grants which refer to grants that are not subject to conditions regarding their use. Alternatively, they may be paid as specific purpose grants which are paid for a particular purpose and/or have conditions attached regarding their use.

Interest expense Costs incurred in connection with the borrowing of funds. Interest expense includes interest on bank overdrafts and short term and long term borrowings, amortisation of discounts or premiums relating to borrowings, interest

component of finance leases repayments, and the increase in financial liabilities and non-employee provisions due to the unwinding of discounts to reflect the passage of time.

Net result Net result is a measure of financial performance of the operations for the period. It is the net result of items of income, gains and expenses (including losses) recognised for the period, excluding those that are classified as ‘other economic flows – other comprehensive income’.

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Term Definition

Net result from

transactions Net result from transactions or net operating balance is a key fiscal aggregate and is revenue from transactions minus expenses from transactions. It is a summary measure of the ongoing sustainability of operations. It excludes gains and losses resulting from changes in price levels and other changes in the volume of assets. It is the component of the change in net worth that is due to transactions and can be attributed directly to government policies.

Non-financial assets Non-financial assets are all assets that are not ‘financial assets’.

Other economic flows

included in net result Other economic flows included in net result are changes in the volume or value of an asset or liability that do not result from transactions. They include gains and losses from disposal, revaluation and impairment of non-current physical and intangible assets; actuarial gains and losses arising from defined benefit superannuation plans and fair value changes of financial instruments. In simple terms, they are changes arising from market re-measurements.

Other economic flows - other comprehensive income

Other economic flows - other comprehensive income comprises items (including reclassification adjustments) that are not recognised in net result.

The components of ‘other economic flows - other comprehensive income’

include changes in physical asset revaluation surplus.

Payables Includes short and long term trade debt and accounts payable, grants and interest payable.

Receivables Includes short and long term trade credit and accounts receivable, grants, taxes and interest receivable.

Supplies and services Supplies and services generally represent cost of goods sold and the day to day running costs, including maintenance costs, incurred in the normal operations of the entity.

Transactions Transactions are those economic flows that are considered to arise as a result of policy decisions, usually an interaction between two entities by mutual agreement. They also include flows within an entity such as depreciation where the owner is simultaneously acting as the owner of the depreciating asset and as the consumer of the service provided by the asset. Taxation is regarded as mutually agreed interactions between the government and taxpayers.

Transactions can be in kind (e.g. assets provided/given free of charge or for nominal consideration) or where the final consideration is cash. In simple terms, transactions arise from the policy decisions of the government.

98 Appendices

Appendices

Appendices 99

100 Appendices